2.3. Reserved0 (bits 1-12)
A receiver MUST discard a packet where any of bits 1-5 are non-zero,
unless that receiver implements RFC 1701. Bits 6-12 are reserved for
future use. These bits MUST be sent as zero and MUST be ignored on
receipt.
...
5.2. RFC 1701 Compliant Transmitter
An RFC 1701 transmitter may set any of the Routing Present, Key
Present, Sequence Number Present, and Strict Source Route bits set to
one, and thus may transmit the RFC 1701 Key, Sequence Number or
Routing fields in the GRE header. As stated in Section 5.3, a packet
with non-zero bits in any of bits 1-5 MUST be discarded unless the
receiver implements RFC 1701.

It should say:

2.3. Reserved0 (bits 1-12)
A receiver MUST discard a packet where any of bits 1-4 are non-zero,
unless that receiver implements RFC 1701. Bits 5-12 are reserved for
future use. These bits MUST be sent as zero and MUST be ignored on
receipt.
...
5.2. RFC 1701 Compliant Transmitter
An RFC 1701 transmitter may set any of the Routing Present, Key
Present, Sequence Number Present, and Strict Source Route bits set to
one, and thus may transmit the RFC 1701 Key, Sequence Number or
Routing fields in the GRE header. As stated in Section 2.3, a packet
with non-zero bits in any of bits 1-4 MUST be discarded unless the
receiver implements RFC 1701.

Notes:

In the section entitled "Packet header," RFC 1701 defined the one-bit Routing Present, Key Present, Sequence Number Present, and Strict Source Route fields in bits 1-4 , the Recursion Control field in bits 5-7, and a Flags field in bits 8-12. It further stated that "[b]its 5 through 12 are reserved for future use and MUST be transmitted as zero." The language in RFC 2784 Section 5.2 makes it clear that incompatibilities between an RFC 1701 transmitter and an RFC 2784 receiver arise only when one or more of the the Routing Present, Key Present, Sequence Number Present, and Strict Source Route bits are set, i.e., when any of bits 1-4 are set.

Verifier's note: This looks like it was the intent of the authors, but the reader should note also RFC2890 which restores the K and S bits.

An RFC 1701 transmitter may set any of the Routing Present, Key
Present, Sequence Number Present, and Strict Source Route bits set to
one, and thus may transmit the RFC 1701 Key, Sequence Number or
Routing fields in the GRE header. As stated in Section 5.3, a packet
with non-zero bits in any of bits 1-5 MUST be discarded unless the
receiver implements RFC 1701.

It should say:

An RFC 1701 transmitter may set any of the Routing Present, Key
Present, Sequence Number Present, and Strict Source Route bits set to
one, and thus may transmit the RFC 1701 Key, Sequence Number or
Routing fields in the GRE header. As stated in Section 2.3, a packet
with non-zero bits in any of bits 1-5 MUST be discarded unless the
receiver implements RFC 1701.